Originally created 03/09/99

FTC and Intel reach proposed settlement



WASHINGTON -- Intel Corp. and the Federal Trade Commission said today they have agreed to a proposed settlement over government charges that the nation's largest computer chipmaker illegally bullied three other companies into handing over secret information about their products.

Intel and the FTC announced the settlement on the eve of the company's antitrust hearing before an administrative law judge in Washington.

The company and the FTC jointly filed a motion to withdraw the government charges filed June 8, said FTC spokeswoman Michelle Muth. She could not discuss details of the settlement, which must be approved by commissioners.

But the FTC's statement also described "remaining issues under investigation," a veiled reference to what's widely believed to be a much broader antitrust probe of Intel's business behavior in the nation's technology industry.

The agency said its lawyers were "committed to working expeditiously to resolve those concerns."

"There's a much broader case the FTC can bring and may bring in the future," said Steve Newborn, a Washington lawyer who represents some of Intel's competitors and has argued for a broader lawsuit.

Newborn said he wasn't surprised to see the settlement proposed, citing the Justice Department's ongoing antitrust case against Microsoft Corp., which has faced embarrassing disclosures in the courtroom from its internal e-mails and from testimony by some of its own executives.

"They saw what's happened to Microsoft and they didn't want to go through that," Newborn said. "I've never thought Intel was stupid enough to go to trial in this case. On a simple cost-benefit analysis, there was no reason for Intel to be fighting this fight."

On the news, Intel stock jumped 3.5 percent, rising $4 to $118.62 1/2 a share this morning on the Nasdaq Stock Market.

Intel, the world's largest manufacturer of microprocessors, had already acknowledged it did most of what the FTC alleged, but the company claimed that those actions were not illegal and that its business practices had not "chilled" innovation.

"We view this compromise agreement as a 'win-win' for both parties and we are satisfied that the agreement gives us value for our intellectual property rights. This is acceptable to both parties and was the result of constructive dialogue between Intel and the FTC," said Craig Barrett, president and chief executive officer of Intel.

The FTC had alleged that Intel illegally withheld from three companies advanced technical information about its upcoming microprocessors to "extort" valuable technology that the companies had developed independently.

It called the company's actions "a raw exercise of monopoly power to muscle competitors into signing over intellectual property rights."

But Intel contended it is legal for the company to decide what secrets to disclose to its customers about its upcoming products. The company makes processors for more than 80 percent of the world's computers and recently introduced its fastest chip ever, the Pentium III.

The three companies allegedly bullied by Intel were Digital Equipment Corp., Intergraph Corp. and Compaq Computer Corp., which now owns Digital.

A spokeswoman for Intergraph, Aggie Frizzell, said the company's executives were meeting today with FTC lawyers to discuss the proposed settlement.

Although the legal issues in Intel's case were narrow, the FTC faced problems winning the case.

It filed its lawsuit during a period of unprecedented competition facing Intel from rival chipmakers, such as from Advanced Micro Devices Inc. and National Semiconductor Corp.